BiggerPockets

Transactional Funding

Transactional funding allows a wholesaler the opportunity to purchase a property with none of the wholesaler's funds, provided that there is already an investor in place to purchase the property from the wholesaler within a short time frame of 2-5 days.

For instance, Mary (wholesaler) has secured a property at 200k, and already has John (a cash buyer/investor) for 250k. John is confident that after 30k in repairs/rehab, he will be able to sell it for 400k. So Mary opens escrow, and upon Enrique (a transactional funding lender) doing due his diligence, Enrique will fund Mary's purchase of the property including closing costs.

Transactional funding has also been used lately for longer term deals, in which the end buyer is financing their transaction. The length of the term can range from 30-120 days. In this situation, if an investor has secured a property and already has an end user in place, the investor will not necessarily have to provide any funds in order to close their purchase of the property.

For instance, Frank (an investor) has secured a property for 210k, and Frank already has and end user for the retail value of the property at 300k. The end user's name is Jeff. Jeff is qualified and approved for a loan for 300k, so Frank is confident that he has a great deal. Frank goes to Enrique (a transactional lender) for an extended/delayed transactional funding. Enrique provides 210k plus closing costs, and allows 30 days or more for Jeff to close his loan to purchase the property at 300k.

Transactional Funding is related to or also known as funding back to back closes, flash funding, double closes, simultaneous closes, double escrows.

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